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Case Details

Case Details
National ID A420336415
Member State Latvia
Common Name link
Decision type Court decision, first degree
Decision date 17/06/2016
Court District Court of Administrative Cases (Riga)
Subject
Plaintiff SIA „EuroPark Latvia”
Defendant Consumer Rights Protection Centre
Keywords penalties, proportionality

Unfair Contract Terms Directive, ANNEX I, 1., (e)

(1) A provision stipulating that in case of nonfulfilment of a contractual obligation a contractual penalty can be applied repeatedly (multiple times) is an unfair contract term and thus is void.
(2) A provision stipulating that in case of incomplete or delayed fulfilment of a contractual obligation a contractual penalty can be applied repeatedly (certain payment for each day of delay) and the total amount of the accumulated penalty is not limited to 10% of the total value of the obligation is an unfair contract term and thus is void.
The plaintiff owned numerous car parking lots. The price for 1 hour in a parking lot was between EUR 0.50 to 3.00. The Terms of Use for parking lots stipulated a fine for a breach of Terms of Use in the amount of EUR 25.00, for which a corresponding receipt was written. This fine was applied regardless of whether the stay in the parking lot was entirely unpaid or partially unpaid. If the breach was not rectified within 24 hours, the contractual penalty of EUR 25.00 was applied again.

The defendant regarded these contract terms as unfair since they did not comply with the provisions of Latvian Civil Law, thus rendering them unfair under the Consumer Rights Protection Law. Pursuant to Latvian Civil Law application of a repeated contractual penalty is prohibited for complete nonfulfilment of contractual obligations and in case of partial nonfulfilment a repeated contractual penalty is allowed but the accumulated total value of the penalty thus applied is limited to 10% of the total value of the obligation.

The defendant adopted a decision which requested the plaintiff to cease applying repeated contractual penalties in cases where vehicles where left in the parking lot without making any payments and to reduce the contractual penalty in cases where the payments were not made in full amount. The plaintiff disagreed and raised a claim in court to repeal the defendant’s decision.
(1) The court analyzed the nature of the contractual penalty and upheld the defendant’s conclusion that the right stipulated by Terms of Use to apply a contractual penalty of EUR 25.00 if the contractual breach has not been rectified within 24 hours constitutes a repeated contractual penalty, which is not allowed under the Latvian Civil Law in cases of complete nonfulfilment of the contract. For this reason the penalty is also contrary to the principle of equality of parties and is disproportionate according to directive 93/13 Annex I, Art. 1(e).
At the same time the court admitted that the plaintiff is entitled to receive payment for the whole time period during which the parking lot has been used.
(2) Next, the court stated that application of repeated contractual penalty if the total accumulated value of such penalty is not limited to 10% of the value of the main obligation, in cases of partial nonfulfilment of a contract is contrary to Latvian Civil Law. Therefore the court found such contractual penalty to be unfair according to directive 93/13 Annex I, Art. 1(e).
At the same time the court admitted that in the case of partial non-performance of a contract the plaintiff is entitled to request a payment for the time the parking lot was used and also the payment of a contractual penalty.
(1) Is application of a repeated contractual penalty for complete nonfulfilment of a contractual obligation unfair?
(2) Is application of a repeated contractual penalty for partial nonfulfilment of an obligation without any limitations unfair?
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The court dismissed plaintiff’s claim to repeal the defendant’s decision.